USA
JP Morgan crashes plain vanilla party
It’s better late than never.
JP Morgan is gatecrashing the US ETF party, rolling out three plain vanilla under its “BetaBuilders” sub-brand. Until now, JP Morgan has offered its ultracheap BetaBuilder funds only in Europe, preferring to list more exotic and alternative ETFs in the US, such as hedge fund inspired "event-driven" and long/short ETFs.
- JPMorgan BetaBuilders Europe ETF (BBEU)
- JPMorgan BetaBuilders Japan ETF (BBJP)
- JPMorgan BetaBuilders MSCI US REIT ETF (BBRE)
BBRE will offer plain vanilla US REIT exposure, by tracking the MSCI US REIT Index. It will be interesting to see how much BBRE costs. The plain vanilla US REIT ETF space is highly competitive with Vanguard’s VNQ charging 0.12% and holding $31bn in assets. Schwab’s SCHH charges 0.07% and has $5bn. To compete in this area, having only listed a product mid-2018, JP Morgan may have to charge a very low fee.
BBJP will offer plain vanilla Japan exposure. It will track the Morningstar Japan Target Market Exposure Index, which targets 85% of the free float weight of the Nagoya and Tokyo exchanges. Here, again, it will be interesting to see how JP Morgan competes on price, with Xtrackers and Franklin Templeton both offering funds at 0.09%. FT's Japan ETF (FLJP) has brought in almost $250 million under management in less than 9 months.
BBEU will give plain vanilla Europe exposure via the Morningstar Developed Europe Target Market Exposure Index. The index takes a market-weighted approach to rich European countries. Franklin Templeton and Xtrackers again offer this exposure for 9 bps.
State Street rolls out new communications sector ETF
State Street is listing a new communications sector ETF, in a rush to keep up with index providers changing GICS in late-September. The Communication Services Select Sector SPDR Fund (XLC) will offer exposure to the newly-defined “communication services” sector. It will complement State Street’s 10 other sector ETFs, which have proved veritable cash cows.
The new sector will pluck the internet giants – your search engines, social media sites, streaming services, app makers, etc. – from the consumer discretionary and technology sectors in which they presently sit. And rehouse the FANGs – Facebook, Amazon, Netflix, Google – that have driven the current tech boom. The sector will also keep the current telecoms companies – like AT&T – in the index.
The rejig will also change the factor weightings of the index. Telecoms companies are particularly popular with value investors and are seen by many as bond substitutes (they usually pay out higher dividends). The addition of internet companies like Amazon, however, will give the index a distinct growth flavour.
London
First Trust brings over internet ETF
First Trust is bringing its top performing internet ETF over to London. The First Trust Dow Jones Internet UCITS ETF (FDN, FDNU) will track the Dow Jones Internet Composite Index, which is made up of the 40 largest and most liquid US internet companies. According to an apt analysis from ETF.com, the fund is the “closest thing to a FANG ETF.” It will be available in GBP and USD and charge 0.55%.
